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A new world view: From why Africa to how Africa

​Rising up from the Atlantic Ocean in Nigeria’s capital, Lagos, is Eko Atlantic city.

Protected by a 10-kilometer sea wall and set upon nine million square meters of reclaimed land, it’s a built-from-scratch metropolis dubbed the ‘Dubai of Africa’. But beyond the gleaming steel and glass it’s a showpiece for economic progress in one of the world’s most rapidly developing economic regions.

A UNICEF report released last year claimed that “the future of humanity is increasingly African”. More than half of the projected 2.2 billion rise in the world’s population between 2015-2050 is expected to take place in Africa and, within 35 years, one in every four people will be African. The majority will live in cities by the turn of the next century – 60 percent. Nigeria alone will house 1 billion people.

What Africa lacks in inherent wealth, it makes up for with a new generation of consumers and workers. And they’re young, too. Sub-Saharan Africa (SSA) is already the youngest region in the world, with 43 percent of its population under 15. This is forcing investors, developers and occupiers to take SSA seriously as a business base.

“There’s a great deal of interest and positive momentum around Africa’s credence as an investment destination,” says Anthony Lewis, Head of Capital Markets, SSA, JLL. “The conversation has moved from why Africa to how Africa.”

A range of sectors are emerging including manufacturing, retail, hospitality and financial services and these corporations and consumers need modern offices, retail and commercial infrastructure. This is creating demand for good quality real estate of all types.

A new breed of city

Eko Atlantic City is an extreme example of urban development. While it’s designed to provide the space and infrastructure to house 250,000 people and become the workplace for a further 150,000 on a daily basis, the ‘build and they will come’ model is not necessarily the future of cities in SSA.

“There is no doubt that the ambition is incredible,” says Lewis. “But are pop up cities the future to real estate In the region? Five years ago, yes, developers took a more holistic view to these master planned developments because existing city centres were clogged up. Big parcels of land are hard to come by, however, and there simply isn’t the take up to justify the infrastructure that’s required.”

Instead, developers are focusing on out of town schemes in existing cities. “Global companies are attracted to periphery CBDs where executives don’t have to sit in traffic,” Lewis adds.

The big infrastructure challenge

Traffic jams are a symptom of Sub-Saharan Africa’s infrastructural shortfalls. It was a subject high on the agenda at the Africa World Economic Forum in June.

“The infrastructure discussion was interesting, everyone wanted to understand how it was progressing and the World Bank made bold statements about significantly increasing allocation to infrastructure development in Africa,” says Mark Bradford, Chairman, JLL Africa.

Infrastructure is the precursor to commercial real estate, especially in industrial, office and retail. Investment in these projects in SSA is expected to expand by 10 percent per year over the next decade, reaching an annual total of US$180 billion by 2025.

China, the region’s largest investor, is heavily weighted towards state-sponsored projects of this nature but foreign investment into direct real estate remains limited and is largely undertaken by domestic groups.

Instead, real estate funds support overseas investors in their property related ambitions in Africa. Since Actis Capital launched the first Sub-Saharan Africa real estate fund in 2007 more than 15 have been established. Together, they’ve committed over US$2 billion of equity capital to property projects and new entrants are expected to bring a further US$4-5 billion over the next few years.

“Chinese money is pervasive in public sector projects but privately it’s scarce. Investors need scale and Africa currently lacks that because supply of real estate is so low,” Bradford adds. “Africa also has a different way of doing business and some investors are more comfortable with entering the market at governmental level.”

Perception versus reality

Negative headlines are perhaps partially responsible for fraying the nerves of would-be investors.

But the ‘bad for business’ perception is not unique to Africa. “This is a label that’s stuck because Africa is the newest kid on the block,” says Lewis. “Corporates and investors need to take a long term view and commit to strategies and investment in Africa with strong local partners.”

The World Bank’s Ease of Doing Business Index highlights 17 countries in SSA in which it is considered easier to do business than in India. And five markets – Kenya, Ghana, Nigeria, Zambia and Mauritius – have demonstrated significant improvement in real estate transparency scores since 2012, according to JLL’s own index.

In the search for new opportunities, Africa just might be the best kept secret in the real estate world.

This article originally appeared on Real Views, JLL's news site that features stories exploring the world of real estate and its impact on the wider business world. Visit the Real Views site to subscribe for our weekly email of top stories, delivered direct to your inbox. www.jllrealviews.com​​